November 13, 2007

What does the "rule of law" mean?

Am I the only economist guilty of using the term abundantly without having a good fix on what it really means? Well, maybe the first one to confess to it. So central has the concept become in discussions on "institutions and growth" that it has become unavoidable. It's sort of like no-economists talking about, say comparative advantage, without quite getting what that means.

Well, actually not quite. What economists mean by comparative advantage is clear. But legal scholars and political theorists have many conceptions of what the "rule of law" means; in fact, the meaning itself is contested. That, among many other things, is what I have learned from reading a fascinating new manuscript from Michael Trebilcock and Ron Daniels--ranging from very "thin" descriptions (rule of law is whatever provides for stability and predictability) to "thick" conceptualizations (rule of law as a form of political morality). Trebilcock and Daniels favor something in between (but are closer to the "thin" definition), formulating a procedural approach that they argue that is consistent with a variety of approaches to economic development (both Amartya Sen and Doug North, to use their figureheads).

What is really useful in the manuscript is a series of comprehensive and detailed case studies on rule-of-law reforms from around the world, ranging from judiciary to police reform. It ends with a very sensible policy agenda for would-be reformers.

Called "Rule of Law Reform and Development," the manuscript is not yet published, but be on the lookout for it.

UPDATE: I just received a copy of the new North-Holland Handbook of Law and Economics(yes one of those outrageously priced monstrosities). Interestingly, it has nothing on the rule of law or on law and development.

And Dominic, we do have an excellent core course on legal institutions and development in our master's program, taught by our very own Fred Schauer, a very distinguished legal scholar. So we are ahead of the game.

Comments

Dani, this is a problem that is not unique to academic quibbling. It is an issue that---on a more practical front---those looking to objectively capture different aspects of governance for the purposes of policy have to struggle with as well. There is a recent paper by Kaufmann & Kraay that addresses this very issue: See http://siteresources.worldbank.org/INTWBIGOVANTCOR/Resources/wps4370.pdf.
In addition, the issue is also nontrivial: There is some evidence that, after decomposing governance into its constituent indicators, researchers have found that some measures are more important than others in explaining, say, growth outcomes.

can't wait to get to that particular manuscript! the "rule of law" is a political discourse of course, in the US one line of it emerges from 1960s objections to civil rights-related civil disobedience -- "law and order" being preferable to "those uppity so-and-sos" not keeping their place. In the 1980s it emerged in relation to development especially with respect to uppity indigenous people in Bolivia not being satisfied with available job opps in Bolivia, hence migrating to the "lawless Chapare" and screwing up the Bolivian economy by growing coca, which actually was screwed not only by its oligarchy-dictator management of ISI but by some of the earliest variants of IMF loan conditionalities, that plus the US dumping tin on the world market and driving that particular commodity's price down below where it was viable as a Bolivian export commodity. Throughout the 80s, the "rule of law" was code for the "rule of US punitive prohibition law", which according to quite a few mainstream orthodox US economists was actually to blame for the escalation of the drug trade with its attendant corruption and bad governance effects.

So, whose law? whose cultural norms informing whose enforcement practices against what populations? Universal definitions of the rule of law ought to take into account law -- and criminology -- as a set of codes and enforcement practices that reflect asymmetric historical, spatial and cultural politics.

thanks for bringing this up and I really can't wait to see that paper!

I am no expert on this, but I usually associate the Rule of Law with the principle that there is no group or individual above the law and that everyone should be treated alike by the law (e.g. no difference regarding race, religion ... and I would add income as well). It is in this respect that Hayek opposes the concept of social justice, since it is based on treating people different by whatever criteria is thought to be important.

There was a lot of work done on this as a result of the rise of the Nazis. They changed the law as they went along so that everything they did was "legal".

This led to the rise of a school of legal philosophy which tried to extract universal principles that could be used as a basis for judging societies.

The person that I've found who was the most successful was Franz Neumann. There is a nice book published in the 1950's which has some of his shorter essays and doesn't require delving into his magnum opus "Behemoth".

This is what I extracted from reading this:

1. All men are equal before the law.
2. Laws must be general, not specific (this rules out bills of attainder).
3. Retroactive laws are illegitimate.
4. Enforcement must be separate from the decision-making agencies.

enforvement can never be separate from decision-making agencies -- enforcers decide where, when and against whom to enforce laws, from cheating on taxes to speeding to illicit drug possession, growing, manufacturing and distribution. this is, among other things, because at any given time, far more people are breaking laws than are vulnerable to policing efforts, unless you have an omniscient state. this may be an argument for fewer laws, and ones that make more sense, but at any given time at any given place the reasons for and effects of law breaking are in relatively legitimate. As for retroactive laws, how about the current controversy over granting amnesty to approximately 20,000 persons convicted under disproportionate crack sentencing (which was recently changed)? This is the difference between social justice and rule of law: the former recognizes that the laws reflect the prejudices, passions, political, and economic inequalities present at the time of their passing (Jim Crow, anyone?, involuntary coca eradication?) and that unless one arrogantly decides that everything's been fixed and we're finally completely Enlightened the legal system must be contested through social justice activism, whether it be civil rights or anti-prohibition groups and individuals. Not only do we have a long way to go towards that goal, it's a Utopia that will never be reached. Legal positivists are naive through and through, a just rule of law is one that provides multiple and ongoing opportunities to challenge the justice of laws and their applications in historically and geographically contingent ways.

Tell you what corvad you read the man's work first and then we can have a discussion.

Here's the citation to the book I had in mind:

Neumann, Franz Leopold (1957). "The Democratic and the Authoritarian State: Essays in Political and Legal Theory." Free Press.

I'm discussing philosophical principles. No one contends that any present state lives up to them completely. In fact if you read my essay you will see where give examples of how every one of them is being violated by the current administration.

Thanks for pointing out the course on legal institutions and development. I had a look at the outline you linked to. It seems to be an introduction to legal institutions which are relevant to economics, but I don't get a sense from the outline how much it deals with the channels through which law effects economic development.

By this I mean, how legal institutions affect the costs and risks of doing business and barriers to competition, and how these in turn affect investment and growth. An excellent report which addresses these issues is:
APEC (2007), Enhancing investment liberalisation and facilitation in the Asia-Pacific region (stage 2): reducing behind-the-border barriers to investment

Of course I only could read outline of the course, so these issues could well be included without me realising.

I’ve read this post with interest. I am excited that you are asking this question and would like to suggest a book on the topic that David Trubek and I recently co-edited. The book is entitled “The New Law and Economic Development: A Critical Appraisal” (Cambridge 2006). It contains essays by legal scholars exploring the legal ideas underpinning what we see as the current consensus in economic development thinking, in which, as you note, the idea of rule of law is pervasive.

Several of the chapters address the idea of the rule of law and its relationship with economic theory and policy, putting it also in historical perspective. My chapter analyzes the meaning of the rule of law drawing from the literature in jurisprudence and development theory. I was intrigued by the vagueness with which the concept is used by academics and policy makers to justify a variety of projects. So, the article provides an institutional analysis of the different units in the World Bank working on legal and judicial reforms to show more concretely how the concept is used.

I always thought this is a conversation that economists and legal scholars should have.

Another update: Howard Rosenthal and Eric Voeten have a recently-published article in the Journal of Comparative Economics on the issue of measuring legal systems (which in turn expands on the work of Djankov et al 2003):

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Perhaps the problem is with the misnomer "developing country". Countries that don't have the basics of "peace, easy taxes, and a tolerable administration of justice" may well indeed be caught in a Malthusian trap where greater national income gets translated into high population but not per capita GDP.

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